Sidebar Site Navigation

Wyoming Business Tips for Aug. 19-Aug. 25

August 10, 2012 — A weekly look at Wyoming business questions from the Wyoming
Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a
collection of business assistance programs at the University of Wyoming.

By Cindy Unger, WSBDC business adviser

“We are just starting a new retail business that will have
both a physical and an online presence. What can we expect in terms of charges
from a credit card processor?” Christine H., Casper.

Unfortunately, credit card processors seem to have many
areas where they feel justified to charge a fee. Different processors levy various
fees for different services, and the fee percentages vary. Choosing a processor
on the basis of cost alone is difficult.

Merchant accounts always charge a “discount rate,” a
percentage charged on each transaction. The amount is based on a company’s
evaluated risk, average sales ticket, transaction type and total charge volume.

Most providers charge one rate for card-present transactions
and a higher rate for MOTO (mail order/telephone/Internet) transactions
(card-absent). Card-present transactions usually cost between 1.5-2 percent.

Card-absent transactions range from 2.2-3 percent. Some
companies levy a monthly minimum fee, ranging from $25-$35 per month. If your
volume is low, be sure to ask about this charge. The merchant bank also will
charge a “transaction fee,” which is between 20-30 cents for card-present
transactions and 30-50 cents for card-absent transactions. Some also may charge
to issue monthly transaction statements.

If all those charges are not confusing enough, there are
additional costs. A basic terminal to process card-present transactions will
run between $150-$300. Terminals with printers are $200-$500, and wireless
terminals can run from $500-$1,000.

For card-absent transactions, a terminal is not required. Use
“virtual terminal” software to verify transactions from a PC. Sometimes this
software is provided free as part of an e-commerce package. Purchase price is
about $150.

Some providers charge application fees of up to $200. These
charges may be non-refundable even if your business is turned down for an
account. There may also be set-up or account activation fees, and other
possibilities include programming Internet processing, customer support and early
termination fees.

Be sure to ask how long it takes for funds to transfer. MOTO
transactions usually take considerably longer to clear. Check if variable fees
such as setup, cancellation and monthly minimum are negotiable. The higher your
dollar volume, the more likely the company will be willing to work with you.

Customer support also is an important part of the package.
Check references with other merchants that use providers being considered. Ask
about wait time, chargebacks, staffing hours and charges per incident.

If selling online, be sure that the processor offers secure
ordering through SSL. Finally, and probably most important, be sure that the
company selected is legitimate. Check for a physical address and phone number.

Read your contract very carefully. Be sure to understand all
fees, minimum charges, the term of the agreement and any early termination
penalties, in addition to the services and policies of the providers being
considered.

The WSBDC is a partnership of the U.S. Small Business
Administration, the Wyoming Business Council and the University of Wyoming. To
ask a question, call 1-800-348-5194, email wsbdc@uwyo.edu or write 1000 E.
University Ave., Dept. 3922, Laramie, WY, 82071-3922.